What do AFAPs invest in?

What do AFAPs invest in?

The Pension Savings Fund Administrators (AFAP) are at the center of the controversy after the decision of the PIT-CNT to advance in a plebiscite that reforms the Constitution and eliminates these entities that today constitute an important part of the pension system in Uruguay. In this context, one of the common questions is what the AFAPs invest the pension savings of Uruguayans in.

According to the data of the Central Bank of Uruguay (BCU)As of August 31, the total assets of the accumulation subfund of the AFAP was 670,618,186,956 pesos, of which 54.41% was invested, through different funds, in bonds, Monetary Regulation Bills (LRM), Treasury Notes —both in Indexed Units (UI) and in Pension Units (UP)— and Notes in Pesos.

This means that, among these investment instruments, the entities invested 364,883,355,522 pesos.

If we look more closely at the amounts allocated to the global dollar bonds, the AFAP invested a cumulative total of approximately 4,359,018,215 pesos —the equivalent of about 113,958,281 dollars, at the current exchange rate— (0.65% of the total); Meanwhile in LRM, The investment was 37,889,927,563 pesos (5.65% of the total).

Retirement subfund numbers

Another data published by the BCU is the composition of the assets of the retirement subfund of the Pension Savings Fund, also as of last August 31. In this case, the total assets are 174,430750,434 pesos; and 64.19% is invested in bonds, LRM, and Treasury Notes and in Pesos. Likewise, 31.19% of the total corresponds only to global bonds and Monetary Regulation Bills.

If the isolated figures are analyzed, the investment in global bonds It is barely 0.40% of total assets, which is equivalent to 697,723,001 pesos or about 18,240,647 dollars. On the other hand, the participation of the LRM in the AFAP portfolio—in terms of the retirement subfund—it is 30.79%. This means an investment of 5,370,722,806 pesos.

The PIT-CNT plebiscite, a risk for private property

The AFAP National Association (Anafap) questioned the plebiscite promoted by the PIT-CNT against social security reform and assured that the proposal does not guarantee “the preservation of a financially sustainable pension system” and even considered that it puts “the right to private property at risk.”

From the entity that brings together the AFAP, they highlighted that the reform was approved with “necessary political consensus” and valued that “it allowed us to face urgent reforms to the system implemented in 1995.” In this sense, they considered that “it was a response to a global reality, demographic change” and stated that “pension systems around the world have been migrating from pay-as-you-go regimes to mixed systems (such as the Uruguayan), with individual savings”, something they linked to “a massive increase in longevity and a decrease in birth rates”.

For this reason, the organization pointed out that in the current system “the savings account is individual and is part of personal assets, not even being seizable, which makes it one of the largest capitals after housing, seen individually.” . That is why they questioned whether the proposal of the PIT-CNT respect “the ownership of these funds,” by analyzing that “it seems that they would be expropriated and become the patrimony of the B.P.S. (placed in a trust).”

In this sense, he elaborated that the initiative “seems to be willing to take for the State what does not belong to it, putting the right to private property at risk.” Anafap went one step further and pointed out that “it expropriates the funds that will no longer belong to each person as much as they have contributed, with a future promise of a better retirement, which the same actuarial studies of the B.P.S. They recognize that they will not be able to be paid.”

Source: Ambito

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